Everything about the volatility index — from the basics to practical use
Puts a number on investor fear and greed
Expected S&P 500 volatility over the next 30 days
A way to manage and protect portfolio risk
October 1987
The highest VIX reading on record
October 2008
Extreme fear after the Lehman Brothers collapse
March 2020
Market shutdowns and peak uncertainty
February 2022
Geopolitical risk priced in
March 2023
Fears over the stability of the financial system
Trades the VIX's tendency to revert to its average
Buy above VIX 30
Sell below VIX 15
Protects an equity portfolio
Buy when the VIX is expected to rise
Size at 1-5% of the portfolio
Implied vs realised volatility
Sell at a premium of 3+
Buy at a discount
Trades around scheduled events
Buy ahead of the FOMC
Position for earnings season
VIX ETFs and ETNs lose value the longer they are held.
Hold briefly, rebalance regularly
The cost of rolling an expiring future into a more expensive contract
Understand contango, time the entry
VIX ETFs do not track the VIX index perfectly
Consider trading the futures directly
Trading can become difficult in extreme conditions
Check for sufficient volume before entering
| Product | Index tracked | Leverage | Characteristics | Suited to |
|---|---|---|---|---|
| VXX | Short-term VIX futures | 1x | Basic VIX exposure | Beginners |
| VIXY | Short-term VIX futures | 1x | An alternative to VXX | Beginners |
| UVXY | Short-term VIX futures | 1.5x | Leveraged, highly volatile | Advanced investors |
| VIXM | Mid-term VIX futures | 1x | Softens roll costs | Intermediate investors |
| SVXY | Short-term VIX futures (inverse) | -0.5x | Gains when the VIX falls | Professionals |